China Distances Itself From Russia For Fear of US Sanctions
Beijing: For all the brouhaha about their deep friendship, China is quietly disassociating itself from Russia and its economy that is falling apart under the weight of western sanctions over the invasion of Ukraine.
In fact, China coldly buried its friendship with Russia deep in the tundra when its Foreign Minister Wang Yi told his Spanish counterpart: China is not a party to the (Ukraine) crisis, and does not want the sanctions to affect China."
That puts an end, for the time being, to the friendship that both sides claimed had "no limits". Ukraine changed all that and China wants not to be seen overtly helping Russia survive the sanctions and open itself to the risk of western sanctions.
To be doubly sure, the west gets the message, China's ambassador to Ukraine declared in a media release that China will never attack Ukraine and we will help, especially economically". This is at a time when friend Russia needs economic help desperately.
This capitulation - what else can it be - of China to the fear of western sanctions is just short of being total. Even now, China has not agreed to condemn Russia for the invasion. As The Economist says, their friendship now has boundaries.
China's is not an empty fear about western sanctions. The country witnessed a heavy sell-off of Chinese stocks because of fear of Chinese companies that the country could face sanctions. The Chinese government had to make an urgent announcement that it would do nothing to invite sanctions in order to keep the financial markets safe and stable.
CNN says, "Analysts say that China is attempting to strike "a delicate balance" between supporting Russia rhetorically but without further antagonizing the United States. Beijing and Moscow share a strategic interest in challenging the West. However, Chinese banks cannot afford to lose access to US dollars, and many Chinese industries cannot afford to be deprived of US technology."
The CNN report explains how China has worked it out: "While China is Russia's No. 1 trading partner, Beijing has other priorities. Trade between the two countries made up just 2 per cent of China's total trade volume. The European Union and the United States have much larger shares, according to Chinese customs statistics from last year."
The question is how exactly is China disassociating with or distancing from Russia. One by allowing, the Russian Rouble to drop by doubling the size of the Rouble trading range.
"The ruble has already lost more than 20 per cent of its value against both the dollar and euro since the start of the war in Ukraine...Russians will have to pay more in roubles for Chinese imports such as smartphones and cars."
Secondly, China has not reacted to Russia's desperate request to allow Moscow to convert its Yuan reserves into US dollars or Euros in order to allow Russia to survive the current economic impasse. Russia holds USD 90 billion worth of reserves in Yuan. The western sanctions have frozen about USD 315 billion worth of Russia's reserves by banning the west's dealing with Russia's central bank.
The most significant help China could offer Russia is through the USD 90 billion worth of reserves Moscow holds in Yuan, wrote Alicia Garcia-Herrero, chief economist for the Asia Pacific at Natixis, in a research report on Tuesday.
Sanctions have frozen about USD 315 billion worth of Russia's reserves -- or roughly half the total -- as Western countries have banned dealing with the Russian central bank.
The biggest Russian worry is that the sanctions stop Boeing and Airbus from supplying spare parts or providing maintenance support for Russian airlines. Jet-engine markers are also under the same pressure. In the coming few weeks, Russian aircraft would begin to feel the pinch as timely repairs and maintenance of defence aircraft will not be possible. On its part, China is not interested in supplying the necessary spares to Russia.
The worst attack from China was in the form of the Asian Infrastructure and Investment Bank stopping all aid and investment-related activities since last month, putting Russia in a tense situation. CNN says this means "USD 1.1 billion of approved or proposed lending aimed at improving the country's road and rail networks is now on hold".
Significantly, The Economist sees China's coldness towards Russia from another angle. It says the west "fears" that China may have decided to "sit back and watch the disaster".
"In their analysis, China expects Russian brute force to prevail within weeks. They worry that the plan of Chinese leaders is to be more assertive in pushing for a ceasefire only once Putin has avoided humiliation, perhaps by taking the Ukrainian capital, Kyiv, which is being shelled. Then China may offer to rebuild Ukraine's shattered cities, hoping that its economic heft will oblige other countries to forget weeks of Chinese indifference to Russian crimes."
The argument of the publication is this: President Xi Jinping sees 2022 as an important year when he seeks a third term of power. Therefore, he would not want to be seen "backing a loser" like President Vladimir Putin. It was only a month ago that both leaders claimed in a statement that their political systems were "genuine" democracies. Xi would not want to explain to the world how the Ukrainian invasion is democratic.
To that end, "China has good reason to wish for an outcome that will satisfy Putin". At the same time, Xi cannot be seen to be helping Putin directly and embarrassing himself by inviting western sanctions. That is why the Chinese leadership is trying out a balancing act.
The Economist explains the irritating situation President Xi finds himself in. "But no matter how the war unfolds, China will treat its relationship with the Kremlin as a means of boosting Chinese power, not Russia's. America has reportedly shared intelligence with allied governments showing that Russia has asked China for drones, surface-to-air missiles and other military aid. China's foreign ministry has called the reports 'disinformation'. Xi has no desire to share the blame for Putin's war, 'best friend' though he may be. Nor are there signs of China hastening to take advantage of a distracted West by attacking Taiwan, the island democracy of 24m people that China claims as its own. Unlike Putin, who seems happy to stage dramatic challenges to the global order, Xi appears more cautious."
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